U.S. patent application number 09/900476 was filed with the patent office on 2002-09-12 for virtual interactive global exchange.
Invention is credited to Melkomian, Raymond, Sarma, Sanjay.
Application Number | 20020128952 09/900476 |
Document ID | / |
Family ID | 22806112 |
Filed Date | 2002-09-12 |
United States Patent
Application |
20020128952 |
Kind Code |
A1 |
Melkomian, Raymond ; et
al. |
September 12, 2002 |
Virtual interactive global exchange
Abstract
A computer based virtual reality trading system for trading
financial products such as commodities and stocks uses a server
based system for generating a virtual trading floor to simulate an
exchange. Traders use local PC's to direct their individual avatars
interactively on the virtual trading floor, using hand and voice
signals similar to a non-virtual exchange. This allows an exchange
to be de-coupled from its physical geographic location as traders
in diverse locations can interact on the virtual trading floor. The
system enables accurate tracking for audit of the trade activity
and simplified trade clearing, while retaining the dynamics of a
non-virtual exchange.
Inventors: |
Melkomian, Raymond;
(Douglaston, NY) ; Sarma, Sanjay; (Belmont,
MA) |
Correspondence
Address: |
William J. Sapone, Esq.
The offices of Coleman Sudol Sapone P.C.
714 Colorado Ave.
Bridgeport
CT
06605
US
|
Family ID: |
22806112 |
Appl. No.: |
09/900476 |
Filed: |
July 6, 2001 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
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60216195 |
Jul 6, 2000 |
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Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 40/04 20130101 |
Class at
Publication: |
705/37 |
International
Class: |
G06F 017/60 |
Claims
What is claimed is:
1. A computer based virtual reality trading system for trading
financial products comprising: means for storing a substantially
visually accurate image of a trading floor; means for storing a
plurality of visual images, each of which corresponds to a visually
accurate representation of one of a plurality of traders; and means
for generating an interactive virtual trading floor space and for
generating virtual trader persons corresponding to the virtual
images of the plurality of traders therein and for supporting
interactive trading between a plurality of the virtual trader
persons; and, means for the plurality of traders to interact and
complete trades via their virtual trader persons on the virtual
trading floor.
2. The system according to claim 1 further comprising means for
recording and storing the interactive trades on computer media.
3. The system according to claim 1 further comprising means for
supplying selected information to the plurality of traders while in
the virtual trading floor space.
4. The system according to claim 1 further comprising means for
enabling a trader to control a corresponding virtual trader persona
via signals selected from the group consisting of voice, optical,
mechanical, hand, body or head movement.
5. The system according to claim 1 further comprising means for
clearing trades.
6. The system according to claim 1 further comprising at least one
server for generating the virtual trading floor, the plurality of
traders networked to and in communication with the server for
interaction via voice recognition and/or hand signals so as to
simulate a virtual open out call auction system.
7. A method for trading financial products in a virtual reality
environment comprising: providing a virtual reality generator for
producing 3-dimensional images of a trading floor to generate a
virtual reality trading floor; providing a plurality of avatars
within the virtual reality trading floor corresponding to a
plurality of traders; providing control signals from a trader to a
corresponding avatar to direct the corresponding avatar on the
virtual reality trading floor; observing other traders via their
corresponding avatars on the virtual reality trading floor;
interacting the avatars of the plurality of traders to simulate an
open out call auction; and completing trades on the virtual trading
floor.
8. The method of claim 7 further comprising recording and storing
the interactive trades on computer media.
9. The method according to claim 7 further comprising supplying
selected information to the plurality of traders while on the
virtual trading floor.
10. The method according to claim 7 further comprising enabling a
trader to control a corresponding avatar via signals selected from
the group consisting of voice, optical, mechanical, hand, body or
head movement.
11. The method according to claim 7 further comprising clearing the
completed trades.
12. The method according to claim 7 further comprising generating
the virtual trading floor using at least one server, and,
networking the plurality of traders with the server.
13. The method according to claim 7 wherein the interaction of the
avatars is by voice recognition and hand signals so as to simulate
a virtual open out call auction.
14. The method according to claim 7 further comprising providing
processing means for coordinating responses on a common virtual
time scale, to accommodate transmission delays.
15. The method according to claim 7 further comprising verifying
the identity of each registered user on the trading floor.
16. The method according to claim 7 further comprising generating
and transmitting a report of completed trades to a clearing
firm.
17. The method according to claim 7 further comprising providing
information selected from news, product price history, financial
charts, and combinations thereof to each registered user.
18. The method according to claim 7 further comprising monitoring
and recording trade activity and reviewing trade activity for rule
violations.
19. The method according to claim 7 further comprising providing at
least one server containing 3D visualization software for
generating the virtual trading floor and for supporting virtual
interactions among the avatars therein.
20. The method according to claim 7 further comprising providing
multiple servers distributed at locations local to one or more of
the plurality of traders, and coordinating the servers to maintain
a common virtual trading floor.
21. The method according to claim 20 further comprising a host
computer system for monitoring the multiple servers to assure that
the plurality of traders view the same virtual trading floor and
avatars at substantially the same time.
22. A computer trading system for trading financial products
comprising: means for creating a virtual environment simulating a
trading floor; means for providing multiuser registration for
accessing the trading floor; means for establishing an iconic
representation for each registered user; means for supporting
direct interaction between the iconic representation to effect
trading interactions; and means for recording and storing the
trading interactions.
23. The computer trading system of claim 22 further comprising a
plurality of computer terminals connected thereto for accessing the
trading floor.
24. The computer trading system of claim 23 wherein at least one
computer terminal has voice recognition software for repeating
vocal statements on the trading floor.
25. The computer trading system of claim 22 wherein the computer
trading system has processing means for coordinating responses on a
common virtual time scale, to accommodate transmission delays.
26. The computer trading system of claim 22 further comprising
means for verifying the identity of each registered users on the
trading floor.
27. The computer trading system of claim 22 further comprising
means to generate and transmit a report of completed trades to a
clearing firm.
28. The computer trading system of claim 22 further comprising
means to provide information selected from news, product price
history, financial charts, and combinations thereof to each
registered user.
29. The computer trading system of claim 22 further comprising
oversight means to monitor trading and to review trade activity for
rule violations.
30. The computer trading system of claim 22 wherein the system has
at least one server containing 3D visualization software for
generating the virtual trading floor and for supporting virtual
interactions among registered users therein.
31. The computer trading system of claim 22 wherein the system has
multiple servers distributed at locations local to one or more
registered users, the servers coordinated to maintain the virtual
environment.
32. The computer trading system of claim 22 further comprising a
host computer system for monitoring the multiple servers to assure
that all registered users view the same virtual environment at
substantially the same time.
Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] This application claims priority in U.S. Provisional patent
application No. 60/216,195 filed Jul. 6, 2000.
TECHNICAL FIELD
[0002] This invention relates to an exchange for various securities
and commodities that simulates in a virtual environment an active
trading floor.
BACKGROUND
[0003] Various systems exist which allow people to buy and sell
securities such as stocks, futures, options, commodities, etc.
Examples would include The New York Stock Exchange, The National
Association of Security Dealers Automated Quotation, The American
Stock Exchange, The Chicago Mercantile Exchange, among others.
[0004] The most common method for trading such securities is the
Open Out Cry Auction.
[0005] Conducted in trading pits--designated areas on the trading
floor of the exchange--this often hectic and dramatic auction
places the traders of a particular contract face-to-face, allowing
any trader to make an offer "by open outcry" to buy or sell an
announced number of contracts at an announced price.
[0006] A trading pit-or ring, as it is sometimes called, is
generally a polygonal or circular platform with one or more
concentric rings of steps dropping toward the center; hence "pit."
One pit is often dedicated to the exchange of a certain contract
type (that is, a particular commodity or financial instrument), and
the traders of a given delivery date for that contract type are
sometimes informally grouped in a corresponding area of the pit.
The nearby contract, that is, the contract with the earliest
delivery date, is often the most actively traded, and is therefore
often traded on the topmost step of the pit, as close as possible
to the phone desks of the futures commission merchants. In other
cases, the pit is divided as a pie is divided into slices, with the
trading in different delivery dates located in corresponding
"slices" of the pit. For purposes of ticker and wallboard display,
bidding information is collected by exchange employees in a pulpit,
also known as a rostrum, usually located on the fringe of the
pit.
[0007] By regulation, a trader announcing a bid (proposal to buy)
or offer (proposal to sell) must do so both vocally (calling out
the price and number of contracts) and by hand signals, though
these regulations are not always precisely followed. The price
quoted for a given contract type is generally given in terms of a
convenient unit size, such as bushels for grains, ounces for gold,
or barrels for oil, even though one contract may represent multiple
units (for example, 5,000 bushels of corn or 1,000 barrels of crude
oil). A typical convention for vocalizing an offer is number of
contracts at a price, for example "three at thirty," for a proposal
to sell a number of contracts at a unit price. The corresponding
convention for vocalizing a bid is a price for the number of
contracts, meaning a proposal to buy a number of contracts at a
unit price. Because of the usually high noise level, the order of
calling price and quantity is reversed in this way between bids and
offers in order to reduce confusion. For brevity and speed, only
the fractional part of the price is usually called out, since the
price generally moves through whole number levels gradually enough
to preclude ambiguity. The minimum fractional price fluctuation for
grains is often a quarter of a cent per bushel and for crude oil is
one cent a barrel. Bids and offers are also given by hand signals.
The following conventions are used at the Chicago Mercantile
Exchange:
[0008] 1. An offer is indicated by facing the palm of the hand
outward, away from the proposer; a bid is signaled by facing the
palm of the hand inward, toward the proposer.
[0009] 2. Price quotes are given with the hand directly in the
front of the trader's body. Prices are in terms of the number of
ticks above the current whole number of the price. Volume signals
are made with the hand away to one side of the body; the number
signaled refers to the number of contracts.
[0010] 3. The numbers 0 through 5 are indicated by the number of
fingers shown pointing upward. The numbers 6 through 9 are shown as
5 plus the number of fingers pointing horizontally.
[0011] Bids and offers must be made openly in this fashion for the
benefit of all traders in the pit; trade must occur with the first
trader to signal acceptance. If two or more traders simultaneously
accept a bid or offer, the trade (if more than a single contract)
must be shared among them. Traders must be silent if they are not
prepared to bid or offer at prices comparable to or better than the
best current prices (the highest bid or lowest offer).
[0012] At the culmination of a trade, the trader on each side
records the number of contracts, the contract type, the delivery
date (by the symbol for the delivery month), the price, the name of
the clearing firm of the member on the opposite side of the trade,
and the initials of the trader on the opposite side. Traders may
wear color-coded clothing or letter-coded badges in order to
identify their status and firm, according to the convention of the
exchange. On some exchanges, each half hour of the trading period
is assigned a different letter of the alphabet, which is
prominently displayed on the trading floor. This letter signal, the
time bracket, would then also be recorded with each trade. All
orders received from outside the exchange must also be time-stamped
as they reach the order desk of the FCM handling the order; this is
a CFTC regulation. If made on the personal account of the trader,
the trade is recorded on a trading card illustrating the buyer's
badge number, the trade date, contract code, contract month, number
of contracts, seller's badge, price and if necessary the time
bracket. If the trade is executed for a customer, the information
is recorded on a multipart order ticket illustrating the name of
the firm, whether it's a buy or sell, quantity, commodity, contract
month, execution order type whether it's limit or market, account
number of the customer, and the execution price. Each trade is
recorded twice, once by each side; any discrepancies, or out
trades, are handled with the clearing procedure.
[0013] On some exchanges, trades in the least active contracts
occur by board trading, that is, by posting bids or offers on
boards outside the pits. The contract type, delivery date,
quantity, and price are posted under "BUY" or "SELL," and remain
posted until canceled or matched by another bid or offer, at which
time a contract is constituted and recorded by an exchange employee
on a sales board, along with the identities of buyer and seller.
Bids and offers must first be made in the pits by open outcry, for
all to hear and observe, before being transferred to a trading
board. Electronic systems replaced the open outcry bids and offers
and transferred the board activity to a screen based trading
system.
[0014] Another form of auction, not as vigorously used in the U.S.
exchanges, is electronic trading. With this form of auction, bids
and offers are made electronically by traders, perhaps physically
removed from one another, and matched by computer, in the manner of
board trading.
[0015] The International Futures Exchange, INTEX, is an electronic
futures exchange operated as a Bermuda corporation, with trading
from computer terminals located throughout the world, including
several U.S. locations. Clearing for INTEX is done by the
International Commodities Clearing House Limited (ICCH) the common
clearinghouse of British future markets. The Chicago Mercantile
Exchange and Chicago Board of trade introduced an electronic
trading system called Globex (previously known as
Post-Market-Trading) for executing trades after normal trading
hours at the International Monetary Market. There is also the Tokyo
Stock Exchange electronic trading system called TOPIX. The New York
Mercantile Exchange has its own electronic trading system called
NYMEX ACCESS.
[0016] The advent of electronic trading promises efficiencies in
clearing and back office operations, access to markets by
physically distant traders. The fairness of order execution has
been the topic of discussion since the inception of screen trading.
The market participants who have used electronic trading systems
have argued that there have been misrepresentations of price and
liquidity on the electronic trading systems.
[0017] Since electronic trading will be based on a different type
of auction than the traditional open outcry format, there is no
guarantee that it can improve the overall efficiency of the
markets. There may also be some resistance to the introduction of
electronic trading by exchange members who have a vested interest
in the current market system. After all, if electronic trading
systems replaced the exchange floors and the open outcry auction
method, the locals from the exchange floors would eventually lose
their jobs and livelihood.
[0018] Another recent comer to the electronic trading markets is
EUREX. It is the first pan-European exchange. Its screen-based
trading system makes EUREX the first completely computerized
exchange in Europe. Today, EUREX's market participants have access
to the electronic trading platform from 14 European countries and
the United States.
[0019] MATIF SA, the French futures and options Exchange, acts in a
dual capacity as market operator and clearinghouse. MATIF SA is a
wholly owned subsidiary of the French stock exchange, the SBF-Paris
Bourse since December 1997. In the second quarter of 1998, trading
switched from open outcry to electronic for all MATIF futures
contracts. NSC is MATIF's electronic trading system (Nouveau
Systeme de Cotation), which has been developed and is used by the
SBF-Paris Bourse. It has been adopted as well by MONEP, the French
equity derivatives exchange. NSC tends to become a standard with
its adoption by the Chicago Mercantile Exchange (under the name
Globex2), as by more than ten other stock exchanges or derivatives
markets so far.
[0020] LIFFE has implemented a program that is anchored by the
development of LIFFE CONNECT.TM., an electronic trading system that
will provide users with a powerful combination of high performance
capacity and an open system design.
[0021] Sydney Futures Exchange is an Asian financial futures and
options exchanges with annual turnovers in 1999 of over 29.7
million contracts. All trading on SFE is conducted on its
electronic trading system, SYCOM.RTM.. SYCOM.RTM.R terminals are
available not only in Australia but also in other major financial
centers such as London, Hong Kong and Japan. Future trading hubs
are also planned for both New York and Chicago. The Sydney Futures
Exchange Clearing Hose (SFECH) provides clearing services for SFE
and its wholly owned subsidiary the New Zealand Futures &
Options Exchange.
[0022] On Nov. 11, 1999, the New York Mercantile Exchange
introduced its updated version of NYMEX ACCESS.RTM.. NYMEX
ACCESS.RTM. is an acronym for the New York Mercantile Exchange
American Computerized Commodity Exchange System and Services and is
a computerized order matching system that enables certified users
to trade certain NYMEX and COMEX Division futures, options, and
spreads outside of regular trading hours. The updated version of
NYMEX ACCESS.RTM. was designed for Year 2000 compliance. The table
(2) below displays the most active electronic trading systems.
1 Exchange Country INTEX International Futures Exchange Bermuda
GLOBEX Chicago Mercantile Exchange U.S. ACCESS .RTM. New York
Mercantile Exchange U.S. EUREX Pan-European Exchange Europe SYCOM
Sydney Futures Exchange Australia CONNECT London International
Financial Great Britain Futures Exchange NSC MATIF France TOPIX
Tokyo Stock Exchange Japan
[0023] The existing systems have three major components that occur
on the floor of the exchange: trade execution, back office activity
and trade reporting. These are illustrated with reference to FIGS.
1, 2 and 3.
[0024] With reference to FIG. 1, this shows the sequence for trade
execution. All of these steps take time and numerous people so that
the process can take from five minutes to about two hours.
[0025] With reference to FIG. 2, the back office activity is shown.
Here, a screen clerk picks up all executed trade sheets from the
ring broker every 15 minutes, though during heavy activity, this
process can take as long as 2 hours. When there is high activity,
the screen clerks may have to stand in line to enter executed
trades into the exchange terminals, and because of the high volume,
errors can occur when entering the trades in the system. These
errors can include entering buy instead of sell, entering the wrong
contract size, price or broker code. A screen clerk may have to
enter 200 trades in 15 minutes.
[0026] With reference to FIG. 3, the trade reporting process is
shown. The trade reporting process is very involved. Entries are
checked for accuracy and reports sent to the clearing firms of the
clients using the clearing firm code and the client account number.
Each clearing firm has an exchange code added to the client account
number. When the screen clerk enters the trades, he includes as
well the account number of the client and the ring broker code.
Errors are inevitable and if there are discrepancies, the exchange
compliance department must research the activities of the ring
broker. This is a slow process as it involves a small staff
managing up to 900 floor traders.
[0027] Existing commodities and stock markets are limited to their
immediate time zones and geographic areas. The market makers,
traders and brokers come from the local area and the lesser the
market participants, the more limited is the liquidity of the
market. The existing exchanges are also limited by physical space.
New markets cannot be added without expanding floor space, and the
size of a trading ring is also limited as only so many people can
gather in a pit for effective trading. Commodity exchanges have not
been able to provide the benefits of hedging to all market
participants in different parts of the world. Thus, a commodity
might be listed at several exchanges situated in different time
zones, leading to unnecessary arbitrage and inconsistencies in
pricing and trading. There are also limitations in the audit trail,
and in brokering swaps, as a swap broker may trade ahead of the
client, or reveal the clients' position, size or name and
compromise anonymity.
[0028] Various computer based systems for electronic trading have
been proposed and are found in the patent literature, such as in
U.S. Pat. Nos. 4,412,287, 4,677,552 and 6,014,643, among others.
However, present electronic trading and the various patents do not
have the capability to acceptably simulate the open outcry that
occurs on a trading floor, and continue to suffer from the problems
identified above. For example, the electronic trading systems have
difficulty showing the market depth and breadth, as a computer
monitor can display only a limited amount of information, in a
two-dimensional environment. Such electronic trading systems loose
the exchange market makers, who are specialists who perform a
function of coming between a buyer and a seller, able to initiate a
trade at different times.
SUMMARY OF THE INVENTION
[0029] It is an object of the present invention to provide a
computer based system for creating a virtual environment that
simulates a trading floor.
[0030] It is a further object to provide a computer based system
that enables users to electronically use an open outcry auction for
trading securities.
[0031] It is yet another object to allow multiple users to
participate on a virtual trading floor environment utilizing the
open outcry method, as a direct substitute for an actual trading
floor.
[0032] These and other objects of the present invention are
achieved by a computer system comprising:
[0033] means for creating a virtual environment simulating a
trading floor;
[0034] means for providing multiuser registration for accessing the
trading floor;
[0035] means for establishing an iconic representation for each
registered user;
[0036] means for supporting direct interaction between the iconic
representation to effect trading interactions; and
[0037] means for recording and storing the trading
interactions.
[0038] Utilizing the present invention, a user enters the virtual
trading pit and participates in trading using an open outcry
auction system. All of the features and nuances that are unique to
the face to face interaction on a trading floor are acceptably
incorporated and integral to the virtual trading environment. Such
a system makes geographic boundaries transparent by nature, as the
virtual exchange floor is available to all market makers, traders,
brokers, etc, from any location in the world. Without physical
limitations, there is unlimited floor space available, and pits can
be added or expanded at will, allowing more liquidity in existing
markets and less expense in launching new markets.
[0039] Preferably, the system utilizes a computer system with high
speed processing capability having programming for providing a real
time environment for participants, whether located locally or
remotely, as well as for maintaining security and for recording and
storing orders to insure the integrity of the process.
[0040] A user would access the environment via a computer terminal
preferably including voice recognition software so that verbal
statements are repeated in the virtual environment. Physical
manipulation, such as the hand signals commonly used can be
displayed based on user input via keyboard, mouse, voice, joystick
or preferably by virtual input from a virtual device such as a
glove that converts hand movement into a digital signal for
simulation on the virtual trading floor. Various devices are known
for user interaction with a virtual environment, from a glove, to a
headset with an internal or heads up display to a full body dome
environment.
[0041] Remote inputs from multiple users are processed to assure
coordinated response on a common virtual time scale, to eliminate
transmission delays which might otherwise favor local users.
Similarly, the user when in the virtual environment is capable of
responding or interacting with others on the virtual floor, through
a display that may be a screen or heads-up display or via another
sensory simulating device so as to simulate face to face
interaction without external distraction.
[0042] The purpose of the inventive exchange is to facilitate
trades, to transact or conduct an increased amount of business. An
exchange facilitating human behavior, which is dynamic, evolving
and ever changing, creates market behavior. Markets are merely
humans reacting or not reacting to information and opportunities.
The inventive electronic open outcry system provides the ideology
of floor trading electronically.
[0043] The virtual exchanges perform three functions: (1) provide
and maintain a physical marketplace (often called the floor)
electronically in a virtual reality where securities can be bought
and sold by the trading community or members of the exchange; (2)
police and enforce ethical and financial standards applicable to
the trading conducted on the exchange electronically in real-time
using an electronic operations center; and (3) promote the business
interests of the trading community (members). The virtual exchanges
do not themselves engage in trading securities, but only provide
the facilities or platform for others to do so.
[0044] Preferably, each virtual exchange will correspond to a real
exchange in structure and be a for-profit organization that will
have shareholders of common and preferred stocks, with persons
being able to buy a seat on a virtual exchange so as; (1) to engage
in floor trading activities; (2) to acquire the right to execute
trades without having to pay commissions; and (3) on monthly basis
to collect interest (rent, lease, or stock dividend) on the current
value of the seat or equity owned. Generally, the value of the
equity (seat) rises as the trading volume and open interest on an
exchange increases.
[0045] The invention provides an electronic trading platform
particularly for all manner of financial products such as traded on
the securities, commodity futures and options markets, allowing
members and market participants to hedge, speculate, and broker for
example in various futures and option contracts in an open outcry
methodology. As the exchange virtually simulates an environment
resembling the floor of a commodity exchange, the traders will
congregate in a virtual trading pit to announce their bids and
offers. This system provides price discovery and market participant
anonymity.
[0046] The virtual system can optionally provide services to
existing domestic and international exchanges for them to trade
during their off hours and to take advantage of the automated audit
trail.
BRIEF DESCRIPTION OF THE DRAWINGS
[0047] FIG. 1 is an illustration of trade activity.
[0048] FIG. 2 is an illustration of back room activity.
[0049] FIG. 3 is an illustration of trade reporting.
[0050] FIG. 4 is a view of a virtual exchange floor; FIG. 4a is
another view thereof.
[0051] FIG. 5 is an illustration of the inventive virtual exchange
system.
[0052] FIG. 6 is an illustrative view of the interchange on the
inventive virtual exchange system.
[0053] FIG. 7 is an illustrative view of the virtual exchange
organization.
[0054] FIG. 8a is an illustrative view of a virtual trade floor as
configured for use by a trader, FIG. 8b is an enlarged view of a
"hot zone" (an area of heavy trading), and FIG. 8c is a view of the
exchange with multiple trading pits..
DETAILED DESCRIPTION OF THE INVENTION
[0055] Virtual reality is a three dimensional computer-generated
interface that allows users to see, move through and interact with
information displayed as a three dimensional world. The three
dimensional world is called a virtual reality world or cyberspace.
For example, a virtual reality world could be the inside of a
building or a golf course. The virtual reality world is displayed
using sophisticated output devices, such as high resolution color
screens or a headset with a monitor in front of each eye to give
the user the illusion that he or she is situated in the virtual
reality world.
[0056] The virtual reality world can display real world objects.
For example, a chair could be displayed in a virtual reality world,
representing a chair in the real world and appearing to have all
the physical properties of a real world chair. In such a virtual
reality world, the user views and interacts with the display as if
the user was in the real world.
[0057] The virtual reality world is usually generated using a high
speed computer processor and specialized graphics hardware. The
computer processor and graphics hardware can be controlled by a
program, called a virtual reality generator to create and
continuously modify a virtual reality world and to simulate
movement through the virtual reality world.
[0058] Virtual reality is regarded as having three features, namely
immersion, navigation and interaction. Immersion is the use of
sophisticated output devices to create the illusion of being inside
the computer generated virtual reality world. For example, a head
mounted display with a high resolution two dimensional color
monitor in front of each eye can be used along with advanced three
dimensional display techniques to create the illusion to the user
that the user is inside the computer generated display.
Alternatively, a high resolution color display, such as the NEC
brand 20 inch monitor could be used to "immerse" the user into the
virtual reality world.
[0059] The second feature of virtual reality is the ability of the
user to navigate through the virtual reality world. For example,
the virtual reality generator could create a computer module of a
molecule or a city and enable the user to move through the molecule
or city. In this case, the physical features of an exchange will
comprise the virtual reality world. The user can navigate through
the virtual reality world using control devices, such as a
trackball or spaceball, an electronic dataglove, a magnetic head
position tracker, a keyboard, a joystick or a steering wheel. The
use of a magnetic head position tracker and dataglove creates a
high feeling of immersion and grants the user the power to navigate
(for example, by gestures) through the virtual reality
environment.
[0060] The third feature of virtual reality, interaction, is the
ability of the user to interact with and control the virtual
reality world For example, a user can specify the parameters that
define and metaphors that comprise the virtual reality world.
Navigation and interaction are closely related concepts, though
interaction extends to exchanges of information with others in the
virtual reality world.
[0061] Virtual reality environments can be created using
object-oriented libraries of functions. These functions can be
inserted into a computer program for rapid prototyping to easily
complete application development. A well known example of an
object-oriented library of function is that created by the Sense
Corporation of Sausalito, Calif., called the WorldToolKit
library.
[0062] The WorldToolKit library of C routines lets a developer
rapidly and easily build real-time three dimensional simulations
and virtual world applications that run on desktop computers. The
WorldToolKit library integrates a simulation manager, a real-time
rendering pipeline, an object manager, texturing functions,
animation sequences, input sensors, lights and graphics display
devices in a flexible object-oriented library. The WorldToolKit
library's texturing functions enable the development of
applications with real-time texture mapping. Video-realistic
textures can be applied to object surfaces in any orientation and
scale, enabling the creation of compelling and lifelike virtual
reality worlds. The WorldToolKit library has drivers for many
popular control devices and output devices so that the user can
configure input and output. Head-tracking, gesture tracking and
object manipulation are accomplished by coupling sensors to
graphical objects (or metaphors) and viewpoints. The WorldToolKit
library is fully described in the WorldToolKit Reference Manual,
1991, published by the Sense8 Corporation, Sausalito. Of course,
other similar systems can be used with the present invention.
[0063] The electronic system consists of a three dimensional
digital graphics and audio platform. As shown in FIGS. 4 and 4a, a
virtual exchange environment 1 has traders 2 who congregate in a
virtual exchange ring 3 to make markets using the open outcry
auction methodology. As in an actual ring, this virtual ring has
virtual steps where traders may congregate, though no one can
occupy the same space at the same time. All bids and offers are
recited in the same manner as is done on a physical exchange floor
pit with one exception, market participants do not need to shout
their bids and offers. Traders are able to see and hear each other
in a virtual form in meetings and off the floor. During trading
hours, each trader's body is an iconic representation which can be
in the form of an avatar that will display his/her badge
number/floor name 5 and their position 6. The position includes
whether it is a bid or an offer, quantity, contract month, and the
bid/offer price. In order to shorten the order display, bids and
offers may be color-coded. Initially, the virtual body of a trader
may be a computer depiction or a box, though ultimately animated or
video avatars will likely be used, to more closely simulate the
"real" world environment in the virtual reality setting.
[0064] In accordance with the invention, a trader or a broker
announces the position 6 (i.e. Bid for 10 July or Offer 8 Jan at
21). The system verifies the order by presenting it in the order
sheet 7 displayed in close proximity of the trader. If the broker
feels the order is erroneous then he/she can motion the order to be
canceled. When a trader 2a wishes to take the bid or offer of
another trader he/she extends his virtual arm 8 to touch the
counter party. The same and similar bids and offers are stacked
above and next to each other in display 9. This enhances the speed
of trading by allowing a trader to touch several bids/offers
simultaneously. The system then matches the buyers' positions
against the sellers'. If there is residual position left in the
order sheet, the system displays the remainder. An optional zoom
may allow zooming into a particular area in order to see the best
bid or offer for closer inspection. A broker receives the clients'
orders on the same order sheet 7 as well. The orders are executed
in the same manner as a trader's own position. This insures true
anonymity of clients without the possibility of a client's position
being exposed to others, as may occur currently through open
outcry.
[0065] One advantage over the actual trading floor is that these
interactions are simultaneously recorded to provide a complete
audit trail during the process. This substantially reduces the
possibility for errors and even if made, eases their
correction.
[0066] If a trader wishes to leave the pit to go to another market,
he/she touches the selected market on the big board display 10 and
then enters the pit or stands outside the trading ring to view the
market activity. The floor participants have the ability to move
the big board or a section of it to any part of the floor
environment for better viewing. The big board preferably is a page
or a window displaying the high, low, and last five trades. These
pages resemble screen windows inside the virtual environment.
Pages, screens, menus, and other internal displays can be moved
around by the user to meet personal preferences, as shown in FIG.
8a.
[0067] For security, in one embodiment, the voice and/or retina of
the members may be used for identification. This eliminates all
unauthorized individuals from entering the exchange floor. A
constant random check using a retina and/or voice identification
systems ensures that the trader is a legitimate member of the
exchange.
[0068] A broker 11 has a display containing all orders coming from
an upstairs broker or an assistant via a slaved screen system 12
that may utilize a keyboard and mouse. A client 13 places an order
with the upstairs broker. The broker 11 enters the trade into the
slave system 12. The order appears in the order sheet 7 inside the
floor brokers environment. Upon execution of the order the system
automatically updates the order sheet display and the slave screen.
This allows the upstairs broker to report the order fill to the
client. Currently, future commission merchants (FCM's) enter orders
either through a screen, which then are routed to the exchange
floor or they are announced over the phone to a floor clerk. In
either case the clerk then runs the orders to the floor broker in
the pit and upon execution of the orders, the clerk then confirms
the trades to the upstairs broker.
[0069] Referring to FIG. 5, this illustrates the trade execution,
back office activity and trade reporting using the virtual
exchange. This system eliminates the clerk and the associated
expenses by allowing the upstairs broker to communicate directly
with the floor broker. It also shortens the execution time
dramatically, allowing for greater market efficiency.
[0070] The floor traders announce their bids and offers in an open
outcry method without the need to raise their voices. When a bid
and offer are matched a trade has taken place. The system then
reports the trades to the FCM's and the clearing firms of the buyer
and the seller.
Arbitrage Opportunities
[0071] In the inventive system, arbitragers have the opportunity to
hear the bids and offers first hand from the broker or an employee
of a broker very much the same way as is done on the exchange
floors. An upstairs broker has the opportunity to view the
bids/offers in the pit. He/she then reports them to the client.
Upon the clients request the upstairs broker recites the order to
be entered into the executing brokers order sheet display. The
upstairs brokers uses the same equipment as the broker though
without the ability to place orders directly into the pit. The
orders are entered into the broker's sheet. This is the only time
that a broker will require assistance from a clerk, since this is
the only function dependent on the level of specialized trades
rather than the ease of use.
Ouotes, Charts, and News Screens
[0072] As an additional option, a full quote system may be provided
in the trader's virtual environment. The market participants would
then have the opportunity to view historical prices, charts,
derived data, and news on a page movable to any location in the
members' environment. Traders will preferably have the ability to
perform, using integrated software, a technical analysis of the
charts provided, for example using a drop down menu of
functions..
Compliance Program Under the Commodity Exchange Act as Amended and
Regulations Thereunder
[0073] As directed by the United States Congress, the Commodity
Futures Trading Commission ("Commission") is to facilitate the
development and operation of computerized trading as an adjunct to
the open outcry auction system. [Section 12(g)] As part of this,
each contract market "shall maintain and utilize a system to
monitor trading to detect violations of the contract market's rules
and regulations." The inventive system can readily comply with this
by including: a method to observe trading, an integral audit trail
and record keeping system, and an ability to review data on trades
to detect violations and bring disciplinary actions against
violators. [Section 5a(b)]
[0074] Furthermore, each contract market is required to comply with
the following regulations:
[0075] (a) Reg. 1.50--Demonstration of continued compliance with
the requirements for contract market designation. (This regulation
is to show that the exchange is complying with the conditions and
requirements of Sections 5 and 5a(a).
[0076] (b) Reg. 1.5 1--Contract market program for enforcement.
(This is to show that the exchange has an affirmative program and
has ongoing compliance with Sections 5, 5a(a), 5b, 6(b), 8a(7),
8a(9), and with regulation's relating to 4c(c).)
[0077] (c) Reg. 1.52--Self-regulatory organization adoption and
surveillance of minimum financial requirements.
[0078] (d) Reg. 1.53--Enforcement of contract market bylaws, rules,
regulations, and resolutions.
[0079] To comply with the Commission's requirements, an oversight
Department may be integrated with the inventive system, possibly
having three sections that are responsible for reviewing financial
surveillance, market surveillance, and trade surveillance
requirements under contract market rules and Commission
regulations. Each section will develop methods and procedures to
comply with exchange rules and with the Commission's requirements
under the Commodity Exchange Act.
3D Visualization Architecture
[0080] The virtual system architecture may be provided by, for
example, the 3D visualization software system for the creation of
the PROMETHEUS.sup.SM Exchange platform. Other virtual reality
generators may also be used. For example, U.S. Pat. No. 6,020,885
describes a system for sharing a three-dimensional virtual reality
space and such systems are known in the art primarily related to
interactive gaming. These can be adapted for use in the present
invention, though other systems could also be used.
[0081] The system will preferably operate via servers. The servers
will preferably send packets of information via high band
Internet-2 with a satellite communication network and a cellular
system backup. The peripherals can be desktop PC's, laptops, VR
gear and any other unit that conforms to the specifications for
receiving data. Preferably, the basic overall virtual exchange
environment generation will occur locally, to distribute this
component of the system. Then, only interaction and update
information need be transmitted, substantially increasing the speed
at which such interactions are displayed. To maintain the currency
of the basic exchange environment, periodic updates are included
with the packets of information, transmitting only necessary
changes. For example, the basic exchange environment can be updated
every 20 minutes as opposed to the immediate transmissions
necessary to simulate real time trading.
[0082] This can be accomplished by having distributed local servers
that maintain the basic virtual exchange environment as well as
facilitating interactive communication between servers. This is
preferably managed by a host system, to assure that all traders
view the same environment at substantially the same time. With such
a system, interactions can be undertaken between users having
relatively small computing devices that have virtual reality
capability, and means for linking to the relevant local server.
This will enable the system to be pervasive, with no need for a
member to be physically located at a specific location, as well as
providing the opportunity to conduct trades 24/7, without
overwhelming a back office system. Full integration and immediate
record monitoring can convert trading from a batch type system, to
a continuous system, efficiently and without losing the character
of a true securities exchange.
[0083] The system architecture for the virtual exchange has four
main components. The user interface elements, the software
architecture, the hardware architecture, and network
architecture.
[0084] The architecture is based on the following high-level
requirements:
[0085] Provide a virtual environment in which traders, located in
remote locations, can participate on an open outcry trading
floor;
[0086] Provide an interface to order execution systems;
[0087] Provide a virtual environment in which traders can feel
comfortable;
[0088] Provide all trading data within the virtual environment in a
manner which will be conspicuous and rapidly accessible;
[0089] Provide 100% uptime 24.times.7;
[0090] Provide the ability to quickly and effectively bring new
users "on-line";
[0091] Provide the ability to quickly and effectively bring new
products "on-line."
[0092] Referring to FIG. 6, a host computing system 14 is in
communication with a pair of servers 15 and 16. Each server has two
users 17, 18, 19, 20. (Of course, the small number eases the
illustration and scale up to many more users and servers would be
understood based on this example.) The host system and servers
provide access to a virtual trading environment 21. The users do
not interact with the computers, but with each other in the virtual
exchange environment, with the users immersed in an environment
illustrated by the displays as shown in FIGS. 8a-8c.
User Interface Elements
[0093] The User Interface Elements (UIE) constitute the equipment
used as an interface to access the virtual exchange. The UIE
receives end-users input and transmit that input to the system.
[0094] The UIE consists primarily of vision, user input, and audio
transmission. The vision element enables the user to view the
virtual world and be a participant within it. The user input
element enables users to act within the system by either moving or
making selections within the virtual world. The audio component
will provide for high-fidelity acoustics within the virtual
environment. One such system is described in U.S. Pat. No.
6,041,127, which uses a microphone array that is steerable for use
in virtual reality audio applications. Of course, other systems
could be used.
[0095] Again, there are existing systems for optical, mechanical,
audio or video input, interaction with the virtual reality space
and these existing systems are readily adaptable for use in the
present inventions. (See also U.S. Pat. Nos. 6,049,327 relative to
hand gesture; 5,844,674 for optical position sensing; 6,052,114 for
body sensing; and, 6,050,822 for total immersion systems.)
[0096] A variety of UWE approaches exist. One such approach is the
head-mounted displays (HMDs) for vision, electronic gloves for
manual input and 3D sound speakers directly mounted on the HMD
equipment. This type of framework enables the user to have
flexibility and freedom to move. However, the products must be
lightweight enough to permit the user to carry the gear for long
periods of time.
[0097] Another approach is to use a virtual dome. A number of
systems enable a user to enter a self-contained area called a dome,
which provides for an enclosed virtual environment. Various input
devices such as the glove can be used in this type of environment.
Another approach may be to utilize video blue screen technologies
to display images of participants in the virtual world,
circumventing the need to invent object agents, or visual
avatars.
Software Architecture
[0098] The software architecture has three main elements. The first
component is the user interface component. This interface gathers
input from the user and displays the virtual world to the user. The
user interface component interacts with the trading floor component
to obtain information from the trading floor, and the database and
execution interface. The user interface component contains most of
the virtual objects that model the environment.
[0099] The second component--trading floor constituents
(server-based components) gathers the input data from users,
updates the database and execution mesh component, and constantly
or periodically refreshes the trading floor, as described
previously. The trading floor component may consist of application
servers. Transaction monitoring software tracks all trades and
identifies transaction times, manages security, handles load
processing and other activities.
[0100] The third component--the database and execution interface
component stores persistent data and transmits the data to the
trade execution systems. This component may transact only with the
trading floor component, as it will only need trading data, but of
course, this can be supplemented to assure adequate recording and
monitoring.
Hardware Architecture
[0101] The hardware architecture, discussed previously with
reference to FIG. 6, preferably consists of servers at distributed
data centers. The severs are connected using high-bandwidth data
connections and clustering software. The architecture supports a
plug-n-play framework enabling servers to be added and removed
based on load factors. Load balancing software manages the
distribution of processing among servers. Currently, British
Telecommunications has a working commercialized product which may
be usable with the present invention, though other systems can be
used.
Network Architecture
[0102] The networking architecture provides for rapid connectivity
between servers in the data centers and end-user traders at the
remote sites. The most effective networking architecture is that of
a virtual private network (VPN). This would utilize the worldwide
Internet infrastructure but utilize private channels, connecting
all remote sites to the data centers. The VPN could be hosted by a
particular network provider or by a variety of such providers,
based on the geographic location of the traders.
The Structure of the Virtual Exchanges
[0103] A basic structure of a typical U.S. exchange is provided as
a virtual futures exchange as illustrated in FIG. 7. Although there
are variations to this structure, the explanations and the
illustration are the most basic fundamental rules of how an
exchange is structured, and these are mirrored in the virtual
environment.
The Virtual (Futures and Securities) Exchange Clearing House
[0104] The virtual futures exchange may initially rely on the
International Commodities Clearing House (ICCH) to clear the
futures contracts. The virtual stock exchange may initially rely on
the National Securities Clearing Corporation and International
Securities Clearing Corporation to clear the securities. Of course,
the virtual exchange may utilize its own clearinghouse. The nature
of a clearinghouse is like an exchange corporation. A clearinghouse
is typically a for profit or non-profit organization. The basic
function of a clearinghouse is to clear futures contracts, options,
or securities. This entails recording of overnight positions handed
down from the clearing members. At this point the clearinghouse
assumes certain responsibilities for the performance of the buy and
sell side. In so doing the clearinghouse requires its members to
maintain a margin account with the clearinghouse as a collateral
against default based on a formatted structure. The clearinghouse
also monitors the financial integrity of its members, sometimes
requiring corrective action. Finally, the clearinghouse maintains a
guarantee fund to cover defaults. By these measures--record
keeping, margin requirements, financial oversight of members, and a
guarantee fund--a clearinghouse supports the financial integrity of
a futures, options, or securities market. Although most U.S.
futures and securities exchanges have their own clearing
operations, the clearing operations of several different exchanges
can be consolidated within a single clearing corporation. The
International Commodities Clearing House (ICCH), for example clears
for most of the futures exchanges internationally and National
Securities Clearing Corporation and International Securities
Clearing Corporation clear almost all the securities exchanges
globally.
The Virtual Exchange Clearing Member Firms
[0105] All futures contracts must be cleared. The virtual futures
and stock exchange members that are not clearing members will have
to maintain an account with a virtual exchange clearing member for
this purpose. Exchange members have the option of becoming a
clearing member by purchasing equity in the virtual exchange
clearinghouse. This avoids clearing through other members and the
associated fees and margin requirements.
The Virtual Exchange Members and Member Firms
[0106] The essence of a futures or stock market is its exchange
members--in case of the virtual exchange, it is the equity holders
who have the trading rights. Membership or trading rights will be
limited to individuals. These individual members will act on behalf
of firms such as brokerage houses, investment banks, or
commodity/security dealers and producers. At some exchanges firms
may not be required to have an individual to maintain membership.
Instead, the firm becomes the member of the exchange. Firms will
not be able to have trading rights at the virtual exchange. No firm
should become a majority owner of the virtual exchange. The total
number of trading rights of the virtual exchange is preferably
limited. Memberships or trading rights may themselves be available
for sale on the electronic floor of the virtual exchange. The value
of membership or trading right will lie mainly in the privileges it
conveys for trading contracts directly on the 3-D electronic floor
of a virtual exchange, with immediacy and low transaction fees.
These members, nominees of members, and other individuals who
actually have and use floor-trading privileges will be traders.
Several basic categories of traders serve to distinguish their
reasons for trade, and often distinguish as well a particular
variety of trading privileges and special transaction fees. These
classifications will be: (1) Floor Brokers, who typically execute
orders placed with them from off the floor of the exchange or by
other traders; (2) Day Traders, who trade for their own accounts
and offset their contract positions each day before the end of
trading; (3) Opportunity traders, who trade for their own accounts,
and specialize in contract positions held over short intervals of
time; (4) Position Traders, who trade on their own accounts and may
hold contracts over a period of days or weeks.
[0107] Although floor brokers sometimes trade their own accounts,
their basic role is the chain of transaction services allowing the
public at large to buy or sell contracts. Floor brokers profit
mainly from fees for this service. Traders on other classifications
attempt to profit from price movements, either by small price
advantages that may appear for very short periods of time, or via
some understanding of the general formation of spot, futures, or
securities market prices combined with the information continually
coming onto the electronic floor of the exchange. Collectively,
they meet a critical need for liquidity, the ability of the market
to act as a reliable and efficient mechanism for quickly taking or
offsetting contract or security positions.
Future Commission Merchants (FCM'S) and Brokerage Firms
[0108] A Futures Commission Merchant is an intermediary between its
customers, drawn from the public at large, and the floor brokers,
of a futures exchange. A broker/dealer provides the same function
on the securities exchange. An FCM acts as an agent for customers,
placing orders and maintaining accounts. The FCM'S and
broker/dealers are able to route the customers orders to the
virtual floor broker via a slave screen that is tied into the
brokers order sheet screen in the virtual environment.
Customers
[0109] Large customers, such as producers, commodity merchants,
exporters, investment banks, and funds may bypass FCM'S by
purchasing an exchange membership allowing them to place positions
directly on the floor of an exchange, with corresponding immediacy
and lower transaction costs. In many cases, such members may place
orders with independent virtual floor brokers in order to disguise
the source and the size of the trade. These customers have the
option of routing orders to several virtual exchange independent
brokers via slave screens placed on their premises.
The Virtual Exchange Operations and Trading Procedures
[0110] The operations center of the virtual exchanges will require
one to two employees at any given time or trading period. The 3-D
visualization and gliding software will enable operations personnel
to glide to the source of trouble and determine a means of action.
A compliance officer can glide to a hot zone (see FIG. 8) and take
proper actions against traders who violate exchange rules.
Price Limits
[0111] The virtual futures exchange, subject to the approval of the
CFTC, sets limits at the end of each trading session on the prices
of certain futures market at which trades may occur on the
following trading day or period. Trading outside of these price
limits is prohibited, with the obvious potential for an excess
supply of a contract at its lower price limit or an excess demand
at its upper limit. Price limits provide a measure of financial
integrity at times of extreme fluctuations in certain market
conditions. For some markets, the virtual futures exchange may also
have variable price limits, allowing price limits during a given
trading session to expand according to formulas. Some contracts may
not have price limits at all. This process is dependent on the
underlying markets.
The Opening Call and the Close
[0112] Trading will begin on the electronic 3-D floor of the
exchange each day or period with an opening call for each contract.
The opening call establishes an opening price or opening range for
prices by posting traders' initial bids and offers as well as the
actual prices and quantities traded. After traders have the
opportunity to execute trades at the opening call, the continuous
open outcry auction begins. For certain markets, a separate opening
call is held in each electronic pit for each delivery date in
succession before the beginning of continuous trading by open
outcry. The opening call is intended to allow an orderly start of
trading and filling of orders that require execution in the opening
range. A closing range is similarly established in the range of
prices at ED4l the end of the trading period for a given contract.
A trader filling a large order at the close has the opportunity to
request that the closing range include all prices of transactions
occurring while that order is filled.
The Settlement Prices
[0113] The settlement price is a representative price from the
closing range, generally as close as possible to the midpoint of
the closing range. The settlement price, similar in concept to the
closing price on the virtual stock exchange, is used to determine
margin requirements and price limits. A special settlement
committee for each futures market is given the responsibility to
choose settlement prices electronically. The opening and closing of
trade in a given contract is signaled with a bell; trading is
forbidden before the opening bell or after the closing bell. Daily
trading hours may vary by contract.
Reporting Prices and Other Information
[0114] The immediate availability of market information to traders
and customers is an important requirement for a successful futures
exchange. Since all trades, bids and offers are captured
electronically, the virtual exchange is able to widely disseminate
the ticker for a fee.
Pit Reporting
[0115] There is no longer a need for reporters (employees of an
exchange) at the virtual exchanges. Usually, reporters are located
at the rostrums or pulpits adjacent to each pit on a physical floor
of an exchange, and record the times and prices of bids and offers.
The reporting process is automatic. Since each trade is recorded
electronically, they are widely disseminated off the trading floor
by ticker tape and directly to electronic market quotation
services. At the virtual exchanges, prices are electronically
recorded and displayed on a large board above the electronic
trading floor in the virtual space of the trader. Customers thus
have a faster display of prices.
Facilities at the Virtual Exchanges
[0116] The most important commodity on the floor of any exchange is
time. For this reason the exchanges provide market information via
electronic wallboards, charting, news, and quote systems, and
internal time and sales screens. Even with the information
available to traders, time is wasted when they have to move from
the trading pits to view charts, quotes, and news on a quote screen
situated at a different part of the exchange floor. At the virtual
exchanges, information screen displaying user selected charts,
quotes, and news are situated inside the field of view of a
traders' virtual environment.
[0117] Even though the electronic wall board is at a fixed location
on the floor of the exchanges for everyone's viewing, not all
traders have the field of view of the big board. Depending on where
a trader is situated in a pit on the floor of an exchange, the
wallboard may be situated behind him out of his/her sight. The
wallboard inside the virtual exchange floor is in the field of view
of the trader (see FIG. 8), and there is no time wasted on the
virtual exchange floor.
Electronic Wallboard Display
[0118] As discussed previously, and with reference to FIG. 8, an
image box resembling an electronic board displays price, volume and
open interest data within view of a trader in the electronic pit.
For each contract type, by delivery date, the board preferably
shows, from top to bottom: 1) the opening range, 2) the high for
the day, 3) the low for the day, 4) estimated volume, 5) the most
recent seven prices recorded before the last recorded price, 6) the
last recorded price, 7) net change, 8) settle, 9) year high, 10)
year low.
[0119] On a physical floor of an existing exchange, a member of the
pit or floor committee may have to call a fast market in a
situation of unusually heavy trading activity. During a fast
market, it is understood that the information collected or
displayed on the board may not be complete or accurate. At these
times, only the last four (rather than seven) prices are shown. On
the electronic floor of virtual exchanges, there is no need for a
floor committee to call a fast market since all trades are
automatically and electronically recorded, displayed, and widely
disseminated.
Computerized Time and Sales Inquiry
[0120] Throughout the larger futures exchanges, terminals dispense
information on trades sorted by time and price according to the
user's request. Time and sales are at the disposal of traders
inside their virtual environment, through their customizable
information display.
Video Monitors
[0121] Located throughout the trading floor of large modern
exchanges are video monitors showing different selections of
information such as market charts, news from various vendors, and
price tables from the ticker and the electronic wallboard display.
These monitors are intended to feed the traders' needs for current
information on conditions in related markets. As shown in FIG. 8,
at the virtual exchanges, the video monitor is displayed inside the
virtual environment of the trader.
Orders on the Virtual Exchange Floors
[0122] A futures order is an instruction by a customer of a futures
commodity merchant (FCM) to a representative of the FCM to buy or
sell futures contracts and securities. All orders are routed via
slave screens from the FCM sites to the brokers' virtual
environment.
Order Ticket Information and Placement
[0123] A request to buy or sell a given number of a particular
futures contract or number of shares at the best or limit price
will be available via slave screens that are routed to a page
inside the brokers virtual environment. The representative of the
FCM is no longer be required to place information on the multipart
order form as is done for other exchanges. The registered
representative selects and enters the following information into
the slave screen which is routed to the virtual page of the
broker:
[0124] 1. The action code, such as buy (BUY), sell (SL), cancel
(CXL), or cancel a former order (CFO), which generally means to
cancel only some part of a former order (as opposed to CXL for a
complete order cancellation).
[0125] 2. The quantity, an integer number of contracts (or, for
certain contract types, a number of units, such as "1000 MMBTU's"
of natural gas).
[0126] 3. The contract description, stating both contract type and
delivery date by month, such as "December (Z) natural gas."
[0127] 4. The futures or swap price, or in the case of a market
order, "MKT," to indicate "at the market," meaning at the best
available price.
[0128] 5. The execution instructions such as limit,
market-if-touched (MIT), stop limit.
[0129] 6. The order duration, the period of time during which the
order may be filled.
[0130] 7. The customer's account number.
[0131] 8. The initials of, or some other code for, the AP of the
FCM.
Handling of the Orders
[0132] Orders are generally handled in the following sequence on
the virtual exchange floors:
[0133] 1. The customer will communicate the order, perhaps by
telephone, to the FCM. In some cases, high net worth individuals
and fund managers may call directly to the broker on the floor of
the virtual exchange or they will have a slave screen from which
they will enter their orders.
[0134] 2. A registered representative enters the order information
into the slave screen containing the information listed above. The
screen based order ticket automatically is time stamped as soon as
the registered representative presses the send key. An FCM that is
not a member of the virtual exchange comes to an arrangement with a
member of the exchange.
[0135] 3. The floor broker views and reviews the batch orders to be
filled inside the order page and he/she takes the appropriate
trading action.
[0136] 4. At execution, the floor broker confirms the execution of
the order by virtually touching the order inside the order page. At
the time of execution the virtual exchange electronically records
the trade and places it inside the order page. The recorded
information is the price, the quantity (if a partial execution),
and the broker or trader on the opposite side of the trade. The
information is then automatically relayed back to the slave screen
at the FCM desk.
[0137] Notice that a few steps that have been eliminated are a
floor representative of the FCM placing the order information on an
order form, time stamping the order form, and relaying the order,
often by floor messenger, to a floor broker trading for the FCM in
the appropriate pit or an FCM order desk. The registered
representative and the floor broker no longer has a go-between, the
order desk. Another step that is removed is the function of an
assigned FCM employee or a clerk at the edge of the pit placing
orders into his or her order deck. Removing these layers will save
time and employee costs.
[0138] The floor broker no longer spends time recording on the
order form price, quantity, and the opposite broker and then
relaying the order form back to the FCM desk. These are time
consuming steps. The entire sequence above is a fraction of a few
seconds. Meanwhile, on a physical exchange, this can take as much
as two to three minutes and even longer to complete.
Elimination of Errors on the Virtual Exchange
[0139] Exchanges typically promote the idea that despite often
hectic conditions and high transactions volumes, errors are
uncommon, but the fact of the matter is that errors happen on a
daily basis and the average error may be $10,000 or more. These
errors occur even at times when the market is quiet and little
activity is shown on the floor of the exchange. For instance, a
clerk who was supposed to give a client's sell market on close
order (MOC) to a broker to cover an open long position. Instead,
forgot about the order, placed it in his pocket and after the
market closed for the day he left the exchange. The next day the
market opened sharply lower and he realized that he forgot to
execute the order. This can be a costly error for all parties
involved.
[0140] At the virtual exchange, these errors are eliminated since
all orders and open positions are displayed in the order and
execution pages of the broker/trader. And since one layer of
personnel, the clerk, is removed from the trading process, all
trades have to be executed.
[0141] Another type of error eliminated are discrepancies between
the buying and selling traders' execution. At a physical exchange
the buyer and seller execution records are handled by the out order
procedure at the clearing stage, one day later. Errors in handling
an order (failure to execute a market order near the best available
price at the time the order is stamped) are corrected if necessary
by an exchange regulated procedure the day after the trade occurs.
At the virtual exchange, all trades have to be agreed upon before
consummation of the trade.
[0142] In summary, the present invention utilizes a computer based
virtual reality trading system comprising:
[0143] means for storing a substantially visually accurate image of
a trading floor;
[0144] means for storing a plurality of visual images, each of
which corresponds to a visually accurate representation of multiple
traders; and
[0145] means for generating an interactive virtual trading floor
space and for generating virtual images of the multiple traders
thereon and for supporting interactive trading between the multiple
users; and means for multiple traders to interact via their virtual
multiple trader persons on the virtual trading floor.
[0146] The system above can further comprise means for recording
and storing the interactive trades on computer media.
[0147] The system above can further comprise means for supplying
selected information viewable by a virtual trader while in the
virtual trading environment.
[0148] The virtual exchange can further comprise means for enabling
a trader to control his/her virtual trader persona via signals
selected from the group consisting of voice, optical, mechanical,
hand, body or head movement.
[0149] The virtual exchange can further include means for clearing
trades.
[0150] The virtual exchange can comprise at least one server for
generating the virtual trading floor, multiple traders networked to
and in communication with the server for interacting with other
traders via voice recognition and/or hand signals so as to simulate
a virtual open out call auction system for the products traded.
[0151] A method of the invention comprises providing a method for
trading products in a virtual reality environment by providing a
virtual reality generator producing 3-dimensional images of a
trading floor;
[0152] providing an avatar within the virtual reality trading floor
corresponding to each trader;
[0153] providing control signals from the trader to the avitar to
direct the avitar in the virtual reality trading floor;
[0154] observing other traders in the virtual reality trading
floor; and
[0155] interacting the avatars of multiple traders to simulate an
open out call auction and completing trades on the virtual trading
floor.
[0156] While preferred embodiments of the present invention have
been shown and described, it will be understood that various
changes or modifications could be made without varying from the
scope of the invention.
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